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As a business that sells goods under long-term payment schemes, it would be ideal if all customers met their payment obligations. However, this is not the reality. There may be circumstances where you have supplied goods that are not paid for. It is crucial that your business has mechanisms in place that protect and uphold your interest in goods that are pending payment. This article will detail two mechanisms that your business can implement to protect your goods pending payment in New Zealand. 

Retention of Title Clauses

It is essential that you enter into a contract with your customers to govern the period of time between selling the goods and receiving the final payment. This contract should contain a retention of title clause. A retention of title, or Romalpa, clause specifies that you, the seller, retain ownership of the sold goods until your customer pays for them in full.

Your customer is entitled to take physical possession of these goods. However, if they do not complete the payment, you can take back possession of the goods. If the items are damaged, your customer will be liable to pay the cost of repair or replacement. If your customer sells your goods before completing the payment, you are entitled to the proceeds of that sale. 

However, for this clause to be enforceable, you must:

  • inform your customer on how the retention of title clause impacts their possession of the goods. Your customer must confirm in writing that they received this information; and
  • provide your customer with a copy of the agreement governing the sale of the goods that contains the retention of title clause. 

The Personal Property Securities Register

A retention of title clause will be ineffective someone registers a security interest in your goods, including:

  • your customer;
  • another individual;
  • a business; or
  • a company,

It is crucial that, in conjunction with including a Romalpa clause in your sale agreements, you register your security interest in any goods you sell through a long-term payment scheme.

Security interest is another way to refer to your legal claim to the goods you sell and own. You can register your security interest on the Personal Property Securities Register (the PPSR).

The PPSR is a national register where businesses can register their security interest to personal property. Once you register your interest in goods that have pending transactions, your interest will be ‘perfected’ and you will have top priority in regaining possession of your goods.

It is best practice to have a retention of title clause in your sales agreements and register your security interest to:

  • ensure that you can protect your goods pending payment; and
  • maximise your chances of regaining the goods or compensation if your customer does not complete their payment.

If your customer still refuses to pay their debts, you may have to consider entering into a formal dispute resolution process. 

How Can I Register with the Personal Property Securities Register?

To register your business’ security interest in your goods with the PPSR, you will have to complete a four-step process.

Set-Up an Account

To register your goods with the PPSR, you will need to have an online service account with the Companies Office. To create an online service account, you will need a RealMe login. You can get a RealMe login on the Companies Office website. Once you obtain a RealMe login, you can log onto the PPSR. You will need to specify that you require a new organisation account if your business has never logged in to the PPSR before. 

Register as an SPG (Secured Party Group)

Once you have logged in to the PPSR, you will need to create a secured party group or an SPG. SPG is the term used to refer to the businesses or individuals that register their security interest on the PPSR. You can create a secured party group for your business by clicking on the ‘My Portfolio’ tab on the user dashboard on the PPSR website. 

Gather All of the Required Information

To register your business’ security interest in your goods, you will need the:

  • details concerning your security interest. These details are referred to as the ‘financing statement’ and include information about the goods, the customer who purchased the goods and your business. You will also need to include the date at which the goods should be completely paid for;
  • details of your customer that purchased the goods, such as their full name and date of birth; 
  • information on the goods you have sold. These details will vary depending on the type of goods; and
  • details of your business. This information should appear automatically if you are registered as a secured party group on your online service account. 

Register Your Interest

Once you have gathered these details, you can register your business’ security interest. You will have to pay a registration fee to complete the registration process. 

Key Takeaways

When you sell goods under a long-term payment scheme, there is a potential that your customer will not complete their payment. To protect your goods pending payment, it is best practice to:

  • have an agreement governing your relationship with the customer;
  • include a retention of title clause in the sales agreement; and
  • register your business’s security interest in these goods. 

If you need assistance with protecting your goods pending payment, contact LegalVision’s New Zealand contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What are goods pending payment?

Goods pending payments are items that you have sold to a customer but have not yet received the full payment for.

How can you protect goods pending payment?

You can protect goods pending payment by having an agreement governing your relationship with your customers, including a retention of title clause in the sales agreement and registering your business’s security interest in these goods. 

What is a retention of title clause?

A retention of title clause (Romalpa clause) specifies that you, the seller, retain ownership of the sold goods until your customer pays for them in full.

What is the PPSR? 

The PPSR, or Personal Property Securities Register, is a national register where businesses can register their security interest to personal property.

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